The car engine breaks and you have no way to get to work. Panic sets in because you finally got a second chance by filing for Chapter 13 bankruptcy and now you cannot make your payments. Car accidents and lost jobs happen but you do not need to panic because there are solutions. If you are unable to make your Chapter 13 plan payments then consider these four options.
1. Ask the court for more time
This should be one of your first steps after missing a few payments. You might have had a recent big expense and will be back on track in a few weeks. If you have defaulted on your plan it is possible to request suspending payments to catch up. Make sure to speak with your attorney right away because once you default on your plan creditors are allowed to resume contacting you.
2. Modify your payment plan
If you have a change in jobs and cannot make the same payments as before you can modify your payment plan to make smaller payments. You will need to come up with a new plan and a new set of fixed payments to propose to the court with proof of your altered income. Typically the reduced payments will go towards unsecured debts such as credit card debt.
3. Switch to Chapter 7
Many people choose Chapter 13 bankruptcy to keep some important assets such as cars and their homes. If you are unable to make your Chapter 13 payments it might be time to reconsider filing for Chapter 7 bankruptcy and reassessing which assets you can keep. Although this step may be difficult, switching to Chapter 7 might reduce a lot of stress in your life.
4. Get a hardship discharge
Under special circumstances you can be eligible for a hardship discharge of certain debts. This might be the best option if you had an injury or sudden death in the family which has significantly reduced your earning ability. A hardship discharge will get rid of your non-priority debts, but debts such as unpaid taxes and child support will still need to be paid.
Modifying your Chapter 13 plan is a challenging process. It is recommended that you speak with your bankruptcy attorney about any changes that you need to make.